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Retail and consumer products: Preparing for “the new normal”

Achim Himmelreich
April 16, 2020

The consumer goods and retail sectors are experiencing unprecedented disruption as stores close, people stay home and global supply chains become disconnected or overwhelmed. While every company must focus on meeting present challenges, it is also important to plan for the future. Here we consider what “the new normal” may look like for consumer goods and retail organizations.

Disruption creates new economic regimes

History has shown us that when people are faced with profound disruption, many will question long-standing personal behaviors, belief systems and societal structures. For example, when I visited the United States for the first time in the 1980s, I was impressed by giant supermarkets like Walmart or Kroger. Discussions with Americans made it clear that visiting large stores was not just the preferred way to shop, but the only way they considered doing it. To shop in a typical German discount chain was simply inconceivable.

Fast forward to global financial crisis of 2008. For many Americans, the economic downturn, coupled with digitization, fundamentally changed how and where they shop. Now we see much more variety in the grocery sector in the States. While discounters enjoy continuous growth on the lower end, high-priced retailers such as Wholefoods has put sustainability and health center stage. The giant supermarkets still exist, but the market is much more segmented—and the German discount chains Aldi and Lidl that once seemed so inconceivable are now major players.

Expect a period of flux

In the current crisis, many people are shifting to e-commerce channels purely out of necessity. While some are trying digital channels for the very first-time, others are realizing that they can do far more of their shopping online. Again, we witness how a once familiar behavior can be upset.

Retailers cannot expect that after the crisis, consumer behavior will be restored. While shoppers will still visit traditional brick-and-mortar stores, we expect that many consumers will stay online as a matter of convenience. In addition, many shoppers will remember and value which retailers and consumer goods companies met their needs and formed a personal relationship during these times, influencing long-term loyalty and affinity.

Continuous innovation

For brands operating in today’s environment, it is important to consider that customer needs will change over time. As such, the ability to meet today’s expectations is no guarantee for future loyalty. History is full of examples of companies that solved a problem but failed to adapt and advance over time. Typewriters and cameras, once the peak of innovation, are now novelty items.

In looking at the present retail landscape, it is clear that e-commerce channels will gain market share. Consumer goods and retail companies must become true data-driven enterprises as this capability is a prerequisite to establishing meaningful, personal relationships with consumers. Supply chains must become intelligent to provide the flexibility needed in times of flux and address an ever-accelerating speed of change in consumer behavior. Our recent Smart Retail Planner Overview and  Digital Supply Chain report provide more information about how organizations can use data to adjust their supply-side operations to address these issues.

Finally, for many organizations, this “new normal” will require a reimagining of the business model. It will be necessary to ask some fundamental questions about the future of the retail and consumer goods industries—and what it means for each organization, in terms of operations, supply chain and workforce. To help plan your organization’s future, we welcome you to connect with us in the comments or via direct message.